Colorado Regulatory Update

Colorado Regulatory Update

The Colorado Division of Real Estate (“Division”) recently amended its rules regarding mortgage loan originator licensure requirements, prepayment penalties, reapplication for mortgage loan originators, and the renewal process for mortgage companies.

Colorado Rules 4 CCR 725-3 Chapters 2 and 4, and Rules 1-1-4, 1-4-1 (effectiveJanuary 14, 2014) and Rule 3-1-4 (effective January 10, 2014)

 

4 CCR 725-3 Chapter 2

 

 

An applicant for licensure as a Colorado mortgage loan originator must successfully complete the requirements below:

  • Submit a set of fingerprints for a criminal history check to the Colorado Bureau of Investigations within 1 year immediately preceding the date of application;
  • Register with the Nationwide Mortgage Licensing System and Registry (“NMLS”) in accordance with policies and procedures established by the NMLS.  This includes, but is not limited to, completion of the correct registration application, authorization for the NMLS to pull a credit report, and payment of any fees associated with registration;
  • Submit fingerprints to the NMLS in accordance with policies and procedures established by the NMLS;
  • Complete the 20 hours of pre-licensing education reviewed and approved by the NMLS or by a company contracted by the NMLS for the review and approval of pre-licensing courses;
  • Successfully complete the S.A.F.E. Mortgage Loan Originator examination, developed by the NMLS which consists of two parts.  The two parts include a national component and a Colorado state specific component.  An individual must pass the test in accordance with policies and procedures developed and administered by the NMLS and in compliance with the S.A.F.E. Mortgage Licensing Act;
  • Obtain a surety bond in accordance with any rule of the Board of Mortgage Loan Originators (“Board”) that directly or indirectly addresses surety bond requirements;
  • Obtain errors and omissions insurance in accordance with any rule of the Board that directly or indirectly addresses surety bond requirements;
  • Complete the Division’s Mortgage Loan Originator Application; and
  • Pay the nonrefundable application fee established by the Board.

 

4 CCR 725-3 Chapter 4

 

 

Individuals who fail to maintain a valid license for a period of up to 5 years after the date of license expiration and who are compliant with the annual continuing education requirements will need to complete the following:

  • Register with the NMLS in accordance with policies and procedures established by the NMLS.  This includes, but is not limited to, completion of the correct registration application, authorization for the NMLS to pull a credit report, and payment of any fees associated with registration;
  • Submit fingerprints to the NMLS in accordance with policies and procedures established by the NMLS;
  • Obtain a compliant surety bond;
  • Obtain compliant errors and omissions insurance; and
  • Complete the Colorado Division-specific license application and pay the application fee.

 

Individuals who fail to maintain a valid license for a period of up to 5 years after the date of license expiration and who are not compliant with the annual continuing education requirements will need to complete the following:

  • Comply with other applicable rules; and
  • Complete the 20 hours of pre-licensing education reviewed and approved by the NMLS or by a company contracted by the NMLS for the review and approval of pre-licensing courses.

 

Individuals who fail to maintain a valid license for a period of more than 5 years after the date of license expiration will need to complete the following:

  • Comply with other applicable rules; and
  • Retake the S.A.F.E. mortgage loan originator examination.

 

Mortgage companies must renew the registration on the NMLS.

 

 

Mortgage companies renewing, reinstating or re-applying for registration through the NMLS must do so in accordance with established timelines, policies, and procedures set forth by the NMLS.  The NMLS may collect fees for the purpose of registration applications, renewal applications, reinstatement applications, credit reports, criminal background checks and for other processes associated with registration through the NMLS.

 

 

The Board will issue or deny a registration renewal application within 30 days after the applicant has submitted all of the information necessary for license renewal or reinstatement and after the Board has received all information necessary to make a determination regarding the applicants’ compliance.

 

 

The registration renewal period begins November 1st of each calendar year and ends December 31st of each calendar year.  Mortgage companies that renew or reinstate their license must be compliant with all provisions of the Mortgage Loan Originator Licensing and Mortgage Company Registration Act (“Act”) and all Board rules.

 

 

All registrations expire at midnight on December 31st of each calendar year if the licensee has not properly renewed their license.

 

If a license has expired, mortgage companies may choose to reinstate their registration.  The reinstatement period for reinstatement begins January 1st of each calendar year and ends on the last day of February of each calendar year.  Mortgage companies that reinstate their registration must be compliant with all provisions of the Act and all Board rules.

 

 

Mortgage companies that fail to renew or reinstate their registration shall re-apply on the NMLS in order for the Division to review their applications and determine whether the mortgage company is compliant with the registration requirements.

 

 

All renewal, reinstatement, and application fees are prescribed by the Board and are non-refundable.

 

 

Mortgage companies that do not have an approved registration are prohibited from acting      through employees or other individuals who takes residential loan applications or offers or negotiates terms of a residential mortgage loan.  Mortgage companies that do  not have an approved registration are prohibited from engaging in any mortgage related conduct that requires a registration according to the Act, Board rule, or as prescribed by the Board by position statement.

 

4 CCR 725-3 Rule 1-1-4

 

 

The following provision has been deleted from the rules:

 

 

Individuals who have taken the requisite courses and who have passed the test in accordance with Director of the Division (“Director”) rules within the immediately preceding 3 years of an application and who are compliant with the annual continuing education requirements will not need to duplicate the educational requirements upon reapplication.

 

4 CCR 725-3 Rule 1-4-1

 

The following provisions have been deleted from the rules:

 

 

All mortgage loan originators who obtain a Colorado mortgage loan originator license prior to January 1, 2009 must complete the Director-developed and approved 40 hours of licensing education and pass a two-part written licensing examination by January 1, 2009.  Individuals who fail to comply with this requirement may file for an extension.  Extensions may be granted through and including March 31, 2009 and must only be applied for beginning December 1, 2008 and ending January 30, 2009.  Mortgage loan originators requesting an education extension must:

o       Complete the education extension form.  This form may be found on the Division’s website;

o       Pay a $100 extension fee by money order or a cashier check;

o       Request that the Director inactivate their mortgage loan originator license if they fail to pass the written examination in accordance with this rule by March 31, 2009.  A licensee’s inactive status will remain in effect until passage of the mortgage loan originator examination and subsequent request for activation; and

o       Provide the Director with an original copy of the requisite surety bond, a power of attorney and proof of errors and omissions insurance.

 

 

Individuals who fail to pass the requisite written examination by January 1, 2009 and who fail to comply with the extension process are subject to all forms of discipline authorized by the Mortgage Loan Originator Licensing Act.  Additionally, the license renewal, reinstatement or reactivation fees for such individuals will automatically be increased by $500 due to the related increase in administrative burden.

 

 

The Director’s Mortgage Loan Originator Education Extension Form may be found on the Division’s website.

 

 

On or after January 1, 2009 and prior to January 1, 2010, each individual applicant for initial licensing as a mortgage loan originator must complete, within the three years immediately preceding the date of the application, 40 hours of licensing education and pass a two-part exam approved by the Director before applying for a mortgage loan originator license.

 

 

Individuals licensed before January 1, 2010, in addition to other requirements, must register on the NMLS and as a state-licensed loan originator.  Individuals must apply to Colorado through the NMLS by December 17, 2010, pay the certification invoice issued by the NMLS by December 31, 2010, and pass the national portion of the two-part S.A.F.E. mortgage loan originator exam developed and administered by the NMLS or by a company contracted by the NMLS to develop and administer the two part S.A.F.E. mortgage loan originator exam.

 

 

On or after January 1, 2010, each individual applicant must complete, within the three years immediately preceding the date of their application, the 20 hours of pre-licensing education requirements developed, administered, and approved by the NMLS, or by a company contracted by the NMLS to develop, administer, and approve the 20 hours of pre-licensing education and pass the two-part S.A.F.E. Mortgage Loan Originator exam, also developed and administered by the NMLS, or by a company contracted by the NMLS to develop and administer the S.A.F.E. Mortgage Loan Originator exam, before completing the applications for a state-licensed loan originator license.

 

 

Mortgage loan originator applicants and licensees must receive a certification of completion from their education provider evidencing the successful completion of the respective licensing education coursework before scheduling any of the requisite examinations.

 

 

Before January 1, 2010, mortgage loan originator applicants and licensees must ensure that their education provider files a certificate of completion with the examination provider establishing the successful completion of the respective licensing education coursework before scheduling the exam.  The education provider must file the certificate of completion with the approved examination provider electronically or in such manner as prescribed by the Director.

 

 

Prior to January 1, 2010, the mortgage loan originator written licensing examination consisted of two parts.  The two parts consisted of the federal, Colorado, and consumer protection laws portion and the mortgage lending basics and ethics portion.  On or after January 1, 2009 and prior to January 1, 2010, an individual will not have passed the written test unless the individual achieves a test score of not less than 75% correct answers on both the federal and Colorado law portion of the exam and the mortgage lending basics portion of the exam.  If the applicant failed one of the two parts, the applicant could reschedule with the examination provider to retake only the portion of the exam that he or she failed.  In no event is a passing score accepted beyond 365 days from the date of the passing score.

 

 

On or after January 1, 2010, the S.A.F.E. mortgage loan originator examination, developed and administered by the NMLS or by a company contracted by the NMLS to develop and administer the examination will consist of two parts.  These two parts include a national component and a Colorado state specific component.  On or after January 1, 2010, an individual must pass the test in accordance with policies and procedures developed and administered by the NMLS and in compliance with the S.A.F.E. Mortgage Licensing Act.

 

 

Before January 1, 2010, applicants and licensees must complete the requisite 40 hours of licensing education, approved by the Director, from any accredited degree-granting college or university or any private occupational school that has a certificate of approval from the Division of Private Occupational Schools.

 

 

On or after January 1, 2010, applicants must complete the requisite 20 hours of licensing education from an educational provider approved by the NMLS or by a company contracted by the NMLS to approve educational providers.

 

 

Before January 1, 2010, mortgage loan originator applicants and licensees must successfully complete the required 40 hours of licensing education through classroom instruction or an equivalent distance learning course offered in a manner as prescribed by the Director.  Distance learning must not be construed to include home or correspondent education.  Equivalent distant or distance learning courses must only include online courses that ensure through security features and functionality that an individual has spent the same amount of time on the online course as they would in a traditional classroom setting.  The following licensing education must be successfully completed prior to taking the examination and applying for a license:

o       A minimum of 19.5 hours in federal and Colorado law;

o       A minimum of 16 hours in Mortgage 101; and

o       A minimum of 4.5 hours in business and trade practices.

 

 

Before January 1, 2010, as prescribed by the Director or person(s) authorized by the Director, qualifying mortgage loan originator applicants who meet the following criteria are exempt from having to complete the mortgage lending basics and ethics portions of the education coursework and respective examination.  To qualify for the exemption, mortgage loan originators must:

o       Currently maintain a Colorado mortgage loan originator license;

o       Maintain a membership with a mortgage loan originator association approved for exemption by the Division;

o       Maintain a mortgage loan originator association designation that is current and in good standing;

o       Provide the association’s letter of certification to the education course provider prior to completing coursework; and

o       Provide the association’s letter of certification to an independent testing service contracted with by the Director, prior to taking the federal and Colorado law exam.

 

 

Before January 1, 2010, those who meet the criteria for exemption must complete the federal and Colorado law portion of the licensing coursework and pass the federal and Colorado law portion of the exam with a score of 75% or higher.

 

4 CCR 725-3 Rule 3-1-4 (effective January 10, 2014)

 

The following provisions have been deleted from the rules:

 

 

Mortgage loan originators who recommend or induce a borrower into a transaction that contains a prepayment penalty which extends past the adjustment date for any type of an adjustable rate mortgage are presumed to have violated their duty of good faith and fair dealing.  This includes, but is not limited to:

o       Prepayment penalties that extend past the adjustment date of any teaser rate used to calculate a borrower’s monthly mortgage payment;

o       Prepayment penalties that extend past the adjustment date of any interest rate used to calculate a borrower’s monthly mortgage payment;

o       Prepayment penalties that extend past the adjustment date of any payment rate used to calculate a borrower’s monthly mortgage payment; and

o       Prepayment penalties that extend past the adjustment date of any similar tool or instrument, similar to the teaser rate, payment rate, or interest rate used to calculate a borrower’s monthly mortgage payment.

 

 

Information provided to borrowers should clearly explain the ramifications of prepayment penalties.  Borrowers should be informed of the existence of any prepayment penalty, how it will be calculated, and when it may be imposed.  A prepayment penalty disclosure form may be prescribed by the Board.